Summary
holding that the “bare contention” that a claim involves Federal Power Act and Natural Gas Act preemption issues and conflicting Federal Energy Regulatory Commission opinions regarding tariffs is not sufficient to require withdrawal
Summary of this case from Walker, Truesdell, Roth & Assocs. v. Blackstone Grp. L.P. (In re Extended Stay, Inc.)Opinion
05 Civ. 4079 (GBD).
May 17, 2005
MEMORANDUM DECISION ORDER
Prior to their bankruptcy filing, Enron affiliates participated in wholesale power markets operated by the California Power Exchange Corporation ("Cal PX") and the California Independent System Operator Corporation ("Cal ISO"). Pursuant to the Federal Power Act ("FPA"), 16 U.S.C. § 824 et seq, these markets were governed by tariffs and rate schedules approved by the Federal Energy Regulatory Commission ("FERC"). Plaintiffs filed separate proofs of claim for amounts they contend that Debtors, Enron and its affiliates ("Defendants"), owe. The Debtors have filed objections to all proofs of claim on various grounds. The claims fall into the following categories: (1) claims for refunds and amounts based upon violations of the FPA that are under consideration by FERC (the "FERC Claims"); (2) claims for violation of various state and federal laws premised on Defendants' alleged gaming and manipulation of the electric, power and natural gas markets (the "Market Manipulation Claims"); and (3) claims based on pre-petition meter data errors (the "Meter Data Claims").
Various hearings on the Debtors' objections to the proofs of claim filed by the Plaintiffs are scheduled before the United States Bankruptcy Court for the Southern District of New York, Arthur J. Gonzalez, J., (the "Bankruptcy Court"). Plaintiffs now move for both a mandatory and permissive Order to withdraw the reference to the Bankruptcy Court of all the proofs of claim pursuant to 28 U.S.C. § 157(d). Defendants oppose the motion. For the following reasons, the motion to withdraw the reference is DENIED.
Therefore, Plaintiffs Motion to Stay Claims Objections Pending A Decision To Withdraw The Reference is denied as moot.
Plaintiffs contend that withdrawal of the reference is mandatory because resolution of the Debtors objections to the proofs of claim will require the Bankruptcy Court to apply and consider "significant interpretation" of federal laws other than the Bankruptcy Code. Section 157(d), which establishes the standard for mandatory withdrawal, provides that the "district court shall, on timely motion of a party, . . . withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce." This provision is narrowly construed "to prevent litigants [from] using it as an `escape hatch' out of bankruptcy court." Enron Power Mktg., Inc. v. California Power Exch. Corp. et al. (In re Enron Corp.) ("EPMI"), No. 04Civ8177, 2004 WL 2711101, at * 2 (S.D.N.Y. Nov. 23, 2004); Enron Power Mktg., Inc. v. Holcim, Inc.(In re Enron Corp.), No. 04Civ509, 2004 WL 2149124, at *5 (S.D.N.Y. Sept. 23, 2004). Further, section 157(d)'s application is only appropriate in instances where "substantial and material consideration of non-Bankruptcy Code federal [law] is necessary for the resolution of the proceeding." Shugrue v. Air Line Pilots Ass'n Int'l (In re Ionosphere Clubs, Inc.), 922 F.2d 984, 995 (2d Cir. 1990) (citations omitted); City of New York v. Exxon Corp., 932 F.2d 1020, 1026 (2d Cir. 1991) (mandatory withdrawal is appropriate if it "would otherwise require a bankruptcy court judge to engage in significant interpretation, as opposed to simple application, of federal laws apart from the bankruptcy statutes"); Enron Power Mktg., Inc. v. City of Santa Clara (In re Enron Power Mktg., Inc), No. 01 Civ7964, 2003 WL 68036, at * 4 (S.D.N.Y. Jan. 8, 2003) (instances where courts have found substantial and material interpretations of federal laws include "(1) issues of first impression; (2) analyses of tariffs requiring something other than a rote application of existing precedent; and (3) the decision as to whether resort to administrative remedies is a prerequisite to commencing an action in court").
Plaintiffs specifically argue that withdrawal of the reference of the proofs of claim is mandated because the Debtors' privity objections would require substantial interpretation of FERC-approved Cal ISO and Cal PX tariffs. They further argue that the Debtors' objections premised on federal preemption and the File Rate Doctrine will require substantial interpretation of the pertinent tariffs. They also contend that the legal applicability of the Filed Rate Doctrine is disputed and unsettled. However, this Court does not find that the resolution of the proofs of claim dispute require substantial and material interpretation of federal non-bankruptcy law mandating withdrawal of the reference.
First, Plaintiffs reliance on EPMI is misplaced. In EPMI, the court granted the motion for mandatory withdrawal of the reference because the threshold determination of whether FERC or the bankruptcy court had jurisdiction over the collateral issue required substantial and material interpretation of non-bankruptcy federal law. See Enron Power Mktg., Inc. v. California Power Exch. Corp. et al. (In re Enron Corp.) ("EPMI"), No. 04Civ8177, 2004 WL 2711101, at * 4 (S.D.N.Y. Nov. 23, 2004). Similarly, Plaintiffs also rely on Mirant Ams. Energy Mktg., LP v. Pacific Gas Elec. Co., No. 04CV557A, slip op. (N.D. Tex. Oct. 22, 2004). There, the district court found that "the bankruptcy court would necessarily have to consider the [FPA] in ruling on the adversary complaints". Id. at 2. Such a consideration would be "more than de minimis." Id.
In the instant matter, the Debtors' objections to the proofs of claim do not lead to any jurisdictional conflict requiring substantial and material interpretation of non-Bankruptcy federal law. Plaintiffs have not articulated what is substantial and material with regard to the Bankruptcy Court's consideration of the parties Market Manipulation Claims. Furthermore, Plaintiffs acknowledge that FERC has already issued a number of decisions interpreting the tariffs at issue. Plaintiffs bare contention that these FERC decisions are conflicting does not persuade this Court that substantial and material interpretations of federal law is implicated if the Bankruptcy Court adjudicates the Debtors privity objection to the FERC Claims and Meter Data Claims. Equally unavailing is the argument that the Bankruptcy Court would have to review and interpret the FPA and the Natural Gas Act to resolve the preemption issues raised by the Debtors' objections. Mandatory withdrawal is not available merely because during a bankruptcy proceeding, non-Bankruptcy Code federal statutes or laws will be considered. Shugrue v. Air Line Pilots Ass'n Int'l (In re Ionosphere Clubs, Inc.), 922 F.2d 984, 995 (2d Cir. 1990) (citations omitted). While it is not necessary that the federal law or statute implicated involve unsettled law or issues of first impression, what is relevant is "the degree to which the bankruptcy judge would have to consider [the] federal [non-bankruptcy] law[s]", not just their application.McCrory Corp. v. 99¢ Only Stores (In re McCrory Corp.), 160 B.R. 502, 505 (S.D.N.Y. 1993) (emphasis added). For these reasons, the Court finds that mandatory withdrawal is not warranted here.
Plaintiffs also argue that discretionary withdrawal is warranted in this case because significant "non-core" matters are involved. This Court "may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on a timely motion of any party, for cause shown." 28 U.S.C. § 157(d). Whether a claim is core or non-core is one of the factors a district court should consider in determining whether withdrawal "for cause" exists under section 157(d). See Orion Pictures Corp. v. Showtime Networks, Inc. (In re Orion), 4 F.3d 1095, 1101 (2d Cir. 1993); see also Enron Power Mktg., Inc. v. City of Santa Clara (In re Enron Power Mktg.), No. 01Civ7964, 2003 WL 68036, at * 6 (S.D.N.Y. Jan. 8, 2003). However, a motion to withdraw the reference on core/non-core grounds is a determination to be made by the Bankruptcy Court. 28 U.S.C. § 157(b)(3) ("[T]he bankruptcy judge shall determine, on the judge's own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection . . ."). In the instant case, the Bankruptcy Court has not made any determination that the Debtors' claims objections are core or non-core. Therefore, this Court defers to the Bankruptcy Court in determining the core/non-core status issues in this case. See Enron Power Mktg., Inc. v. Holcim, Inc. (In re Enron Corp.), No. 04Civ509, 2004 WL 2149124, at * 3 (S.D.N.Y. Sept. 23, 2004) (declining to preempt the core/non-core determination by the bankruptcy court).
Moreover, the Second Circuit has held that once a core/non-core determination has been made, the district court "should weigh questions of efficient use of judicial resources, delay and costs to the parties, uniformity of bankruptcy administration, the prevention of forum shopping, and other related factors." In re Orion, 4 F. 3d at 1101; see also South Street Seaport Ltd. P'ship v. Burger Boys, Inc. (In re Burger Boys, Inc.), 94 F.3d 755, 762 (2d Cir 1996) (listing same). Even if the Bankruptcy court were to determine that the instant matters are non-core, judicial efficiency as well as the uniform administration of the bankruptcy court proceedings weigh in favor of not withdrawing the reference. The Bankruptcy Court has presided over the Enron bankruptcy cases for over three years. The Bankruptcy Court is more thoroughly familiar with the Debtors claims and issues in the instant matter and all of the other Enron-related cases. Thus, the Bankruptcy Court is in a better position to adjudicate them all.
In the Enron-related cases, other than Enron Power Mktg., Inc. v. California Power Exch. Corp. et al. (In re Enron Corp.) ("EPMI"), No. 04Civ8177, 2004 WL 2711101 (S.D.N.Y. Nov. 23, 2004) cited by Plaintiff, no court in this district has granted a motion to withdraw the reference, whether discretionary or mandatory. See Enron Wind Energy Sys., LLC v. Marathon Elec. Mfg. Corp. (In re Enron Corp.), No. 04 Civ. 7950, slip op. (S.D.N.Y. Feb. 14, 2005) (discretionary); Amerada Hess Corp. v. Enron Corp. (In re Enron Corp.), No. 03 Civ 5288, slip op. at 6 (S.D.N.Y. Sept. 24, 2004) (discretionary); Enron Power Mktg., Inc. v. Holcim, Inc. (In re Enron Corp.), No. 04 Civ. 509, slip op. (S.D.N.Y. Sept. 22, 2004) (discretionary); Enron Corp. v. Belo Co. (In re Enron Corp.), No. 04 Civ. 1861, slip op. (S.D.N.Y. Sept. 22, 2004) (discretionary); Enron N. Am. Corp. v. Media Gen., Inc. (In re Enron Corp.), No. 04 Civ. 2527, 2004 WL 1197243 (S.D.N.Y. May 28, 2004) (mandatory and discretionary);Enron Power Mktg., Inc. v. Luzenac Am., Inc. (In re Enron Corp), No. 03 Civ. 1524, slip op. (S.D.N.Y. Mar. 25, 2004) (discretionary); Enron N. Am. Corp. v. Random House, Inc. (In re Enron Corp.), No. 03 Civ. 9312, slip op. (S.D.N.Y. Jan. 28, 2004) (discretionary); United Illuminating Co. v. Enron Power Mktg., Inc. (In re Enron Corp.), No. 03 Civ 5078, 2003 WL 22171695 (S.D.N.Y. Sept. 22, 2003) (discretionary); Am. Coal Co. v. Enron N. Am. Corp., No. 03 Civ. 1727, oral decision (S.D.N.Y. June 25, 2003) (mandatory and discretionary); Nevada Power co. v. Enron Power Mktg., Inc., No. 02 Civ. 7891, oral decision (S.D.N.Y. Jan 23-24, 2003) (mandatory and discretionary); Enron Power Mktg., Inc. v. City of Santa Clara (In re Enron Power Mktg., Inc.), No. 01 Civ. 7964, 2003 WL 68036 (S.D.N.Y. Jan. 8, 2003) (mandatory and discretionary). In two instances, motions to withdraw the reference were removed by the court from its docket or calendar at the request of the plaintiffs. See Tribune Co. v. Enron N. Am. Corp., 03 Civ. 0053 (S.D.N.Y.); Enron N. Am. Corp. v. Knight-Ridder, Inc., No. 02 Civ. 9502 (S.D.N.Y.) (Daniels, J.).
The motion for an Order withdrawing the reference is DENIED.